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The euro impact on trade. Long run evidence with structural breaks

Mariam Camarero (), Estrella Gómez-Herrera () and Cecilio Tamarit

No 10/27, ThE Papers from Department of Economic Theory and Economic History of the University of Granada.

Abstract: In this paper we present new evidence on the euro effect on trade. We use a data set containing all bilateral combinations in a panel of 26 OECD countries during the period 1967-2008. From a methodological point of view, we implement a new generation of tests that allow solving some of the problems derived from the non-stationary nature of the data. To this aim we apply panel tests that account for the presence of cross-section dependence as well as discontinuities in the non-stationary panel data. We test for cointegration between the variables using panel cointegration tests, especially the ones proposed by Banerjee and Carrióni- Silvestre (2010). We also efficiently estimate the long-run relationships using the CUP-BC and CUP-FM estimators proposed in Bai et al. (2009). We argue that, after controlling for cross-section dependence and deterministic trends and breaks in trade integration, the euro appears to generate lower trade effects than predicted in previous studies.

Keywords: Gravity models; trade; panel cointegration; common factors; structural breaks; cross-section dependence. (search for similar items in EconPapers)
Pages: 30 pages
Date: 2012-05-25
New Economics Papers: this item is included in nep-eec
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